Happy New Year Market Shakers!

Our first cycle of 2022 is dedicated to the wonderful world of insect-based products. We are buzzing (pun intended) with excitement to talk about this product category which we are sure will infest the year with innovation. 

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Globally, the insect-based product market is still in a nascent state. With swarms of sustainable benefits, however,  the market for edible insect products for human consumption is expected to sky-rocket to $8 billion by 2030 (+24% CAGR). Unsurprisingly, a growing number of startups and companies that are hungry for a slice of the insect pie are beginning to produce insect-based products at a rapid pace. 

Current players are experimenting with products and business models in innovative and exciting ways as they strive to define this new category. In this sense, insect-based products are a futuristic and truly thrilling space for Market Shake to explore. 

A note on this cycle’s structure

Before we begin our exploration, a note on the structure of this cycle.

Our first post is dedicated to an overview of applications: how insects are being applied to different segments of F&B. Next week we’ll dive into global trends. The following weeks will be dedicated to the situation in Japan. 

The market for insect-based products is new; most players scuttled into the space in the 2010s. Companies are figuring out the most promising applications for insects through experimentation and iteration. Most companies in this space are applying insects to several product categories at once, like Eat Grub, a UK startup making cricket crisps AND cricket protein powder. To avoid repeating ourselves as we introduce the movers and shakers in the market, we’ll start by introducing the main product applications for insects in this issue. 

Let’s take a look at what’s on the menu for the first newsletter of the series.

• Overview of insects as a food

• Overview of applications: in which foods are we finding insects?

Overview of Insects as a food

Apart from most of the western world, we have been eating insects for centuries. According to this United Nations report, over 2 billion people continue to eat insects as part of their diets today. This makes the non-insect eaters amongst us the “weird ones” -  as one of the few groups of animals on the planet that do not eat insects. 

Our attitudes to insects, however, are changing. Insects are increasingly being considered as a new superfood source of alternative protein. In recent years they have been farmed and processed into raw material to make products such as burgers, chips, protein powders and more. In light of this, Dutch agricultural market specialist Rabobank forecasts global demand for insect proteins may reach 500 thousand tons annually by 2030 - 50 times that of 2020.

Before we began farming and processing insects to be ingredients for consumer goods, they were basically eaten whole, plucked straight from nature. Let’s quickly recap humanity’s appetite for insects (entomophagy is the technical term) and how it transitioned from the traditional to the modern.

A short history of insects as a food

Insects have long been eaten in parts of Asia, Africa, South America and tropical regions. Traditionally eaten whole, insects are an important nutrient-rich food source. Particularly in the tropics, where high temperatures make for bigger bugs, insects like locusts swarm regularly and are considered a reliable source of protein. In parts of Asia, insects have also been viewed as a delicacy. The silkworm larvae, for example, is a common street food eaten in Korea, China and Vietnam.

The western world, on the other hand, tends to be more squeamish about bugs. The western farming tradition has historically depended on livestock as the main source of protein as animals doubled as aids to help farm crops. Conversely, insects came to be seen as “pests” because they bit the livestock and infected them with disease. They also had a habit of eating crops. This resulted in a negative attitude towards insects that has become culturally ingrained in people over time, eventually spreading to other parts of the world alongside the western livestock tradition.

In the 21st century, our society has begun searching for sustainable alternatives to livestock farming, and our interest in insects as a viable protein source has been growing. In 2013, the United Nations published a groundbreaking report which promoted insects as a sustainable food and feed source of the future. This report sparked numerous ventures in the edible insect product space, and in 2020, investment in insect-based protein almost doubled to $475 million. So, what is it about insects that businesses and investors see so much promise in? 

Why the sudden craving for creepy crawlies?

Insects’ recently touted potential as a protein source is strongly linked to the 21st century’s ecological crisis. The world population is expected to reach 9.7 billion by 2050, leaving us without an adequate amount of arable land to produce enough food for everyone via traditional methods. Even if that wasn’t the case, current livestock production is unsustainable and responsible for 14.5% of global greenhouse gas emissions, and 10% of global water consumption. 

Compared to animals, insects are a more sustainable protein source. Take crickets, one of the most commonly farmed insects, as an example. It requires 25KG of feed to produce 1KG of beef, versus 2.2KG of feed to produce 1KG of crickets. Equally, 100 gallons of water will produce 6g of beef protein, 18g of chicken protein, and 236g of cricket protein*. 

*Production efficiency differs depending on the insect species. 

Insects also serve as rich sources of fibre and micronutrients, such as iron and zinc. In addition, their exoskeletons contain a substance called chitin, a polysaccharide which boosts immune systems of poultry, so they can be raised without antibiotics.

Insect-based foods are not without their barriers

Investors have their reasons for not making a beeline for insect-based products, however. One of the biggest barriers to the success of the insect product market is consumer attitudes. Many of us have a seemingly natural aversion to insects - known in the industry as the “ick” factor - which makes customers biassed against eating bugs. Traditionally seen as “pests” and unclean (thanks cockroaches), most customers' first reaction to products containing insects is a solid, “I’ll pass”.  For example, a 2020 analysis of consumer attitudes towards insect-based products in Italy highlighted that 23% of those surveyed flatly rejected eating insect-based products. 

Recently, companies have been grinding insects into flour-like powder so that they can be incorporated into products without resembling their original form. Even with this, and touting the nutritional and environmental benefits of insects, more work needs to be done if we are to ever have many people dare to sample insect products.

Another obstacle is cost. The market for insect-based products is in its infancy, so demand for insect products is low. This means production costs for insect raw materials are high, translating to pricey products.  A report by Barclays found that Bugfoundation’s 2-pack insect burger patties cost €5.99, almost double the price of beef. Further investment in scalable production of insect protein is still required for product prices to decrease.

So, the market for insect-based products is still relatively new; rich with challenges AND opportunities.

Let’s take a closer look at the state of the insect product market today, beginning with the kinds of products in which insect proteins are applied in.

Overview of applications

What kinds of insects are we seeing in products?

With over 2000 edible insect species on record, companies are mainly focussing on a few key varieties for production:

• Crickets

• Grasshoppers

• Black soldier fly (BSF)

• Mealworm 

• Silkworm 

Academics admit that there’s plenty of research left to be done on which insects are edible, as well as most efficient for production. We at Market Shake are excited to see what kind of grubs will crawl onto our plates as the industry advances.

Which foods are we finding insects in?

Protein powders and bars

We found that the most common application for insects is in sports nutrition products, crickets being the main bug of choice for this application. They can be processed down into a powder or flour with a mild nutty flavour, making it an ideal ingredient for plain or flavoured protein powders and bars. 

The protein powder market is thriving, expected to reach $36.05 billion by 2028, expanding by CAGR of 8% from 2021. The market is also already receptive to alt protein sources, as 2019 saw a 40% increase in plant-based product launches. 

The majority of startups we surveyed in North America and Europe focus on producing insect-based products for the sports nutrition market. Over 60% in the case of the US. Big players include the likes of US based EXO Protein, who make protein bars, and Germany’s isaac Nutrition, who produce protein powders, bars, and porridges from cricket powder.  

Companies’ websites promote crickets for their nutrition profile as well: high in protein, and bursting with vitamins and minerals beneficial for sport. They also strongly emphasize in their marketing the sustainable benefits of crickets as the protein of the future.

Protein-based products are mainly sold online; directly from company websites, or via online marketplaces such as Amazon. Some products are sold in brick-and-mortar stores like French insect-based protein bar, Jimini’s, sold in Selfridges.

Whole insects

The second most commonly available type of insect-based product is insects in their original forms, whole and unprocessed. Whole insects for human consumption have been long commercialized, primarily as novelty products. In Asia, however, some consumers regularly enjoy whole insects as a snack or side dish, such as edible insect larvae consumed in rural Nagano prefecture, Japan. 

Every region of the world is also home to several companies that sell whole-insect products. UK startup Eat Grubs sells whole grasshoppers, crickets and mealworms, for example, and  Australia's Grubs Up offers whole roasted crickets and mealworms. Those focusing on this as their primary business are mostly located in Asia. For example, JR Unique offers Asia's largest selection of edible insects and insect-related products for retail and wholesale markets all over the world. 

Whole insects can be purchased online directly from company websites or marketplaces such as Amazon. Outside of specialist stores, whole insects are available at retail in a limited capacity. U.K. supermarket Sainsbury’s started selling whole roasted crickets in 2018. In Japan, whole insects can be found in large discount store chain Don Quijote and via vending machines dotted around Tokyo.

Snacks and confectionary i.e. cookies and chips

Insect-based snacks and confectionery are also significant applications for insects. Several companies in each region produce cricket snacks like chips, tortilla chips and cookies. 

Notable companies in this space include Australia’s Circle Harvest (2007), seller of cricket corn chips and cricket cookie mix, U.K. startup Small Giants - whose Cricket crackers are sold in U.K. supermarket Sainsbury’s, and Japanese household goods store, MUJI, who sell cricket-based crackers(2020) and chocolate bars(2021) online and in-store.

It’s worth noting that producers lean on the health benefits of insects to market these products. An example is Circle Harvest, whose cookie mix emphasizes the high protein and vitamin B12 content that the addition of cricket powder brings. Given consumer aversion to eating insects, product packaging and product descriptions are used as an opportunity to educate consumers about the health and sustainability benefits of insects.

Alternative meat products i.e. burgers

Alternative meats made from insects are still a small segment of the market for insect-based products. This is likely due to the complexity and cost of production, and also a lack of regulation in each region, which we’ll explore more next week.

The few companies that have made moves in this space, however, have been successful. Bugfoundation (2014) is a German startup, whose campaign to change German law regarding insect consumption enabled them to get their insect-based burger into German supermarkets in 2020. The startup was purchased by a producer of alternative meat products, Kupfer Innovative Foods, in 2021. 

Ento (2018), a Malaysian cricket protein startup, also developed a cricket-based burger and has plans to partner with burger chain myBurgerLab to trial it on Malaysian consumers.

It is likely that insects as a meat substitute are still a few years away from taking off, but early experimentation with the application suggests that this is a space to watch.

Grain-based products i.e. pasta, oatmeal, flours, bread

Insects are easily processed into flour and powder, making for smooth and easy application in bread and pasta. And that’s exactly what several companies are doing.

Fore mentioned Ento sell cricket-enriched sourdough bread on their online platform. Isaac Nutrition released cricket-enriched oatmeal, providing a novel option for the popular European breakfast. 

Our research identified that several companies in Australia and New Zealand are applying insects in pasta products as well. New Zealand’s EatCrawlerz offers protein penne, and Australia's Hoppa Foods and Circle Harvest both produce and sell cricket-infused pasta. 

These products are currently sold online via company websites or health food marketplaces.

Pet food and feed for animals

Pets consume over 20% of the world’s meat and fish according to reports. Companies and consumers are increasingly becoming aware of the greenhouse gas emissions caused by livestock farming and problems of overfishing, causing both parties to seek more sustainable sources of proteins for pets. Insects’ high feed conversion rate makes them one such option. 

Insect-based pet food is currently the largest market for insect proteins. Whatsmore, it is showing strong signs of exponential growth. A report by Dutch bank Rabobank predicts that insect production for pet food applications will reach 150,000 metric tonnes by 2030. 

In recent years, several large companies have entered the market for insect-based pet foods. Mars Petcare launched their Lovebug 100% insect-based cat food in the UK market in March 2021. Similarly, Nestle released insect-based dog food in Switzerland at the end of 2020, under their Beyond Nature’s Protein brand.

Interesting moves, however, are also being made by smaller startups. UK based sustainable pet food company Yora launched their insect-based dog food in January 2020, earning over 1 million in sales in the first year. Their product is already sold in over 16 countries around the world, including Japan.  

That’s all, folks! 

Hungry for more? 

Stay with us because, next week, we’ll take a world tour of the startups and companies that are defining the global market for insect-based food and beverages!

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